"We've reviewed our contracts, and our Unix license is irrevocable and perpetual," Mike Fay, vice president of communications for IBM's systems group, said in an interview Monday. "We're completely committed to AIX and will continue to ship it."

SCO disagrees strongly with IBM's position. "That's hogwash," said Chris Sontag, senior vice president of operating systems at SCO and head of the company's SCOsource effort to make more money from its intellectual property. Sontag pointed to contract language that specifies terms under which IBM's license may be revoked.

SCO, inheritor of many of the rights to the Unix operating system initially developed by AT&T, filed a billion-dollar lawsuit on Thursday alleging that IBM violated its trade secrets by implementing ideas from Unix in the open-source Linux operating system. The suit, run by high-profile attorney David Boies, also alleges that IBM breached its contracts with SCO that allow it to sell its version of Unix, called AIX.

Among claims in SCO's lawsuit is the allegation that "IBM is affirmatively taking steps to destroy all value of Unix by improperly extracting and using the confidential and proprietary information it acquired from Unix and dumping that information into the open-source community," the suit said. "IBM's tortious conduct was also intentionally and maliciously designed to destroy plaintiff's business livelihood and all opportunities of plaintiff to derive value from the Unix software code in the marketplace."

SCO also claims IBM induced SCO customers, including Sherwin-Williams, Papa John's Pizza and Auto Zone, to breach their own contracts with SCO.

Reviewing the contracts
SCO threatened to terminate IBM's Unix rights in a letter sent Thursday to IBM Chief Executive Sam Palmisano. The letter said that IBM breached its contract with SCO by "subjecting our Unix trade secrets to unrestricted disclosure, unauthorized transfer and disposition, unauthorized use, and has otherwise encouraged others in the Linux development community to do the same."

One key part of the dispute hinges on language in "Amendment X," a 1996 modification of the original Unix contract IBM signed with AT&T in 1985. Amendment X grants IBM "irrevocable" and "perpetual" rights to Unix.

However, Sontag pointed to the next sentence in the agreement, which reads, "Notwithstanding the above, the irrevocable nature of the above rights will in no way be construed to limit...SCO's rights to enjoin or otherwise prohibit IBM from violating...SCO's rights under this amendment."

Rich Gray, a Silicon Valley intellectual property attorney, said it's not unusual for license agreements to employ apparently contradictory terms about whether a license is perpetual and irrevocable.

"There could be provisions in the agreement that say the license is terminated upon the happening of certain events," Gray said. In other words, "the license is perpetual so long as the license agreement itself stays in force."

If IBM chooses to continue shipping Unix, SCO will go to court over the matter, Sontag said.

"This is a legal agreement. They are obligated to the terms. If they violate the agreement, we will get a court order. If they violate the court order, they will be in contempt of court," Sontag said.

Gray said the heart of the battle will take place in court. "They'll send a letter back on the license agreement issue. But the real fight is going to be in court," he said.

IBM is likely to fight back directly, arguing that it hasn't improperly used any Unix trade secrets, Gray predicted.

Big Blue took issue with the suit's language that IBM is "destroy all value of Unix." To the contrary, "AIX is the fastest-growing Unix in the industry. We've never been more committed to AIX," Fay said.

IBM shipped $3.6 billion worth of Unix servers in 2002 and is gaining market share, according to Gartner.

Open-source backlash
Although SCO executives are careful to say they have no issues with the Linux community or collaborative open-source development process in general, SCO's actions have triggered negative responses among many, including a proposed boycott

"SCO has trashed their business, thus this has to be just an exit strategy," said Bruce Perens, an open-source advocate and unofficial spokesman for the movement. "We really wanted these guys to be our partners, for years. We tried, and they never really did," Perens said.

SCO, which was named Caldera Systems before acquiring the SCO Unix products, sells a version of Linux that never has the market share of competing products from companies such as Red Hat and SuSE. SCO's Linux product now is based on SuSE's Linux version through a consortium called UnitedLinux. In the wake of SCO's lawsuit, SuSE CEO Richard Seibt said Friday his company is "reevaluating our relationship with the SCO Group."

"We at SuSE were greatly disappointed to learn of the SCO Group's recent actions...(and) while we strongly believe that this does not impact Linux, we are concerned that these actions are not in the best interest of customers, partners and the Linux community," SuSE CEO Richard Seibt said.

And the suit does indeed affect the open-source realm, Gray said.

"The risk IBM is facing," Gray said, "is an application by SCO Group to the court for a preliminary injunction to stop further shipments of Unix-based products and, potentially, Linux-based products which in turn are based on the supposedly purloined trade secrets."

About the author

Stephen Shankland has been a reporter at CNET since 1998 and covers browsers, Web development, digital photography and new technology. In the past he has been CNET's beat reporter for Google, Yahoo, Linux, open-source software, servers and supercomputers. He has a soft spot in his heart for standards groups and I/O interfaces.
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